The efficiency of health and education expenditures in the Philippines

Abstract

This paper attempts to measure the efficiency of provinces in the Philippines in utilizing public resources for health and education where only 1% of the total budget is spent for health and 3% is allocated for education. With such budget constraints, it is important to examine the efficiency of spending on social services as small changes can have a major impact in achieving the Millennium Development Goals. Efficiency is defined as the deviation from the frontier which represents the maximum output attainable from each input level. This efficiency frontier is estimated using the data envelopment analysis, free disposal hull and Malmquist-DEA. We use expenditures for social services for input and primary and secondary enrollment rates, literacy rate per province, and life expectancy for outputs. An analysis of efficiency scores shows that provinces where the level of inequality is higher (as measured by the Gini coefficient) as well as those who receive a larger portion of their budget as grants are among the least efficient. This research can help in the budget allocation and rationalization among Philippine provinces.